Tax Preparation Starts With the Next Payment

Start with the payment, not the tax form

The IRS says athletes must report NIL income even when a payer does not issue a Form 1099 or W-2. A missing form is not a reason to omit income. IRS guidance on NIL income

A practical starting record can be simple: who paid you, what the payment related to, when it arrived, the amount shown on the payment record, and where to find the supporting agreement. Keep documented withholding, fees, and other adjustments distinguishable from the amount deposited. If something is unclear, mark it for review instead of choosing a category simply to make the record look complete.

Not every arrangement produces a bank deposit. The IRS includes noncash compensation, such as merchandise, gift cards, and services, in its NIL guidance. IRS guidance on noncash NIL compensation For those arrangements, a useful record would include what you received, when you received it, the associated agreement or message, and any documentation of its value. Leave valuation questions visible for your preparer rather than excluding the arrangement.

Record the activity separately from the payment: when it happened, where it took place, and what you did. The IRS specifically advises athletes to track where they perform NIL services because state tax obligations may arise. IRS guidance on NIL activity locations An appearance date and a payment date may differ; keeping both gives your preparer facts to evaluate rather than a timeline to reconstruct.

Future scheduled installments should also remain separate from payments already received. This is an organizational distinction, not a rule that determines when income is taxable. Preserve the agreement and relevant dates, and raise questions about payment timing or access to funds with your preparer.

Give each opportunity a connected record

An agreement explains the arrangement. A payment record shows what arrived. A receipt and an accompanying note help explain a related purchase. The IRS identifies supporting documents as evidence behind business records and notes that more than one document may be needed to substantiate an expense. IRS guidance on supporting records

Consider a hypothetical sponsorship that pays an athlete $6,000. The athlete also has a $450 equipment receipt that they believe relates to the campaign. The recordkeeping task is to connect the agreement, payment, receipt, and explanation—not to conclude that the equipment is deductible or that taxable income is automatically $5,550.

A compact record could look like this:

These are illustrative categories, not a required accounting format. A consistent campaign name or reference can connect the files without putting everything into one document. The important part is that someone reviewing the payment can find its context and see which questions remain unresolved.

A receipt needs context, not a promise of a write-off

A receipt can help establish what you purchased, but it does not decide deductibility. For self-employed business activity, IRS guidance requires deductible business expenses to be ordinary and necessary; the personal portion of a mixed-use expense is generally not deductible. Earning NIL income does not turn every sports-related purchase into a business expense. IRS Publication 334: Business expenses

Keep the receipt and add a short explanation. What was purchased, which activity was it used for, and was any of that use personal? Note whether another party reimbursed you and keep the relevant correspondence. Those facts give a reviewer something more useful than a folder labeled “write-offs.”

For the $450 equipment example, an athlete might record that the equipment was used to produce a particular campaign and was also used personally. That note does not settle the tax result. It makes the mixed use visible so the preparer can evaluate it rather than having to discover it later.

The same approach applies when a parent, agent, or manager helps organize the information. Agree on where documents belong and how unresolved questions will be recorded. The athlete should still be able to understand what has been collected and what has not yet been decided.

Keep a system you can maintain during the season

One workable structure is a tax-year folder with four groups: income and agreements, expenses and receipts, tax documents, and questions for review. Within those groups, use consistent file names that identify the date, payer or vendor, and activity. Keep related files connected through the same campaign reference rather than relying on memory to explain why they belong together.

Treat that structure as a practical starting point, not an official checklist or a reason to buy a particular product. IRS guidance allows a recordkeeping system suited to the business that clearly shows the required information. IRS recordkeeping overview

Digital storage still needs to preserve usable records. IRS Publication 583 explains that electronic systems must retain complete, accurate information that can be retrieved and reproduced legibly. IRS Publication 583: Electronic records As a practical check, reopen a saved receipt before moving on: can you read the date, merchant, amount, and purchase details? An image that exists but cannot be read will not explain much at review time.

Choose a recurring review time that fits your actual schedule. A brief weekly check might cover new payments, missing receipts, and unanswered questions; a quieter week may need very little attention. The aim is to keep the unresolved pile manageable, not to resolve every tax issue during a study break.

Use a secure storage and sharing arrangement appropriate to the information, and agree with your preparer on how sensitive documents should be delivered. Avoid public links or general website chat boxes for private financial records. An orderly folder is useful only if you can maintain it and share it appropriately.

Reconcile the records before handing them over

When year-end documents arrive, compare them with the records you have already maintained. Reconciliation means checking that different records of the same activity agree—or identifying why they do not. It is not adding every document to the income total as though each one represents a new payment.

For example, a payment confirmation and a year-end tax form may refer to the same sponsorship income. Connect both to the existing record and investigate differences instead of creating a second income entry. Keep the original documents and write down what does not match; do not change one amount merely to make the totals agree.

Also separate money reserved for taxes from tax payments actually made. Moving money into a savings category is not evidence that a payment reached a tax authority. Keep payment confirmations distinguishable from the reserve balance. Self-employed athletes may need to make estimated tax payments during the year, according to IRS NIL guidance. IRS guidance on NIL tax payments

The broader question of how to budget irregular earnings is covered in The Athlete Paycheck Is Different. Here, the task is narrower: make the record clear enough to show what was received, what was set aside, and what was actually paid.

Make the professional handoff a conversation, not a document dump

Before sending your records, ask the preparer what they need and how they want the information organized. A useful handoff can include a short overview of income sources, the supporting documents, and a separate list of questions. Summaries should help someone navigate the evidence, not replace it.

Make unresolved questions specific. “The payer’s document shows a different amount from my payment records” is a more useful starting point than “Something looks wrong.” Explain which records you compared, what differs, and whether you have already asked the payer for clarification.

Mention international circumstances or activity in multiple jurisdictions early so your preparer can determine whether specialist review is needed. Organizing the facts does not resolve the tax treatment, but it makes the question easier to identify. A basic recordkeeping workflow should not be mistaken for a complete answer to a complex situation.

Ask about retention as well as preparation. The IRS says how long to keep a record depends on the activity or event it documents and the need to substantiate income or deductions. There is no single deletion date to assume for every file. IRS guidance on record retention

Keep the habit small enough to repeat

The next payment does not require an elaborate new system. It requires a record, its supporting documents, and enough context to explain the arrangement later. As more opportunities arrive, a consistent habit gives you a way to see what is complete and what still needs attention.

The goal is not to become your own accountant. It is to stop asking your future self—and the people helping you—to reconstruct a financial year from scattered clues. Tax preparation becomes a more useful conversation when the records already tell the story and the unanswered questions are easy to find.

This article provides general financial education, not individualized tax, legal, or investment advice. Tax treatment and documentation requirements depend on your circumstances. Consult an appropriately qualified professional for personal guidance.